Conference nyoss1::market_investing

You buy municipal bonds through a broker.  There are brokers who specialize
in munis, but you can also buy them through a regular broker.  They pay
interest semi-annually.

Most munis these days are registered, meaning that the municipality (actually
their banker) has your name and address and sends you a check every six months.
Bearer bonds have coupons that you clip every six months and deposit in the
bank like cash.  If bearer bonds are lost or stolen, tough luck -- they're
negotiable.

Many munis are callable, meaning that the municipality can redeem them early.

You can keep your bonds in your brokerage account so your broker can deal
with such things as calls and coupon clipping.

Municipal bond interest is exempt from federal income tax and from the income
tax of the state of the issuer.  Bonds of U.S. territories are exempt from
the taxes of all states.  So if you live in Massachusetts, you pay no taxes
on Mass bonds or Puerto Rican bonds, but you pay state tax on New York bonds.

   re: .0

   You can also buy municipal bonds indirectly through various Mutual
   Funds.

   Since municipal bonds generally do not return as much as stocks (personal
   opinion), "no-load" funds are the best way to maximize the investment.

   If you own the bond directly, then I do not know the answer to your
   second question:

     "Do municipal bonds provide regular income, or is it only
      available upon maturity?"

   I do know, though, that Mutual Funds invest in and trade the bonds, in
   that way providing you with regular income.  (Each fund is different
   in how it pays you back -- monthly, quarterly, etc.)  Since the company
   in which you've entrusted your money has more cash available to it then
   you or I are ever likely to have, the mutual fund helps to increase its
   "pay out" by trading the bonds.

   As you know, a small investor can get 'killed' by brokerage fees,
   essentially eating up the profit one makes (or hopes to make).

	Ron

re .2:

Individuals generally do not "trade" municipal bonds.  They buy and hold
them for several years (often to maturity).  There are no commissions in
the sense that there are for stocks -- brokers make their profit on
mark-ups (when you buy) and mark-downs (if you sell, rather than hold
until the bond matures or is called).

Hi,

Since interest rates are at a 20-year low, the value of my long-term Mass
Bay Transit Authority (MBTA) municipal bond is higher than what I paid for
it.  I've held it for almost 7 years now and it matures in 2006.  I have
kept the bond over the years since it provides nice, double tax-free income
at 6.875%.  I've also kept the bond as a way to diversify my money between
equities and bonds.

My question is: should I consider selling now, taking the gain, then
reinvesting the money in perhaps a short-term bond fund to maintain the
diversity in my holdings?  Or, should I just continue to hold the bond (it
is callable by the way) since I'm 99% certain that I won't need the money
before the maturity date? 

Everyone says don't hold long-term bonds now because of the impending rise
in interest rates, but I'm practically *positive* I won't need to sell
before maturity and risk a loss.  And if the bond is called, I'll get paid
the face value, right?

Thanks.

Diana

You need to check the terms/convenants of the bond.  In many
cases, when bonds are called, the  issuer pays more than face
value.

I would suspect that these bonds are callable after ten years.  
So - unless interest sky rockets, the bonds will most likely be called.

Another consideration is taxes.  If you hold the bonds to maturity or
whenever they're called, the interest is tax-free as well as the
return of your principal. 

If you sell for a gain, the premium (or some portion) could be taxable.

Gim

    Thanks for re-using an existing topic!
    
    One of the problems with individual bond issues is that you get creamed
    on the commissions and bid/ask spread.  Do you intend to sell a small
    number of ($1000) bonds via a broker?  Makes it expensive to get out.
    
    If you can find someone to buy it from you (like, say, any of the
    several thousand misguided readers who think munis are a good buy)
    then perhaps you can arrange for a no-commission transaction at the
    closing price someday soon.  THAT would be the ideal way to get out.
    Or in, if such is your preference.
    
      John

If the facts stated in .4 is correct and it is callable in 10 years, you
really have a 3 year bond - a rational agency would call the bonds then
issue new bonds are at a lower rate.  In this case, it might
just be simpler to take the interest for next three years and then
let the bonds be called away.

The impact is of interest rate changes on 3 year bonds are not
that great. Again, understanding the covenants of the bonds is
the key.

Regarding interest rates: no one can predict them with any degree
of certainty. Smart money said after the election that interest rates
would go up.  It did the opposite.  What will happen in 2-3 years?

Gim

I just called Fidelity and got a quote on selling all the 1K bonds -- I
have several.  They quoted me $102.95.  Plus, there is a $50.00 fee when
you sell less than 20 bonds. Does this translate to $1,029.50 for each 1K
bond I sell? It looks like right now, I'd gain very little getting rid of
these. They also told me that the bonds were callable in three years at
$103.00, declining from $103.00 to par as the years go on....

It sure looks like it does me no good to sell them now since they will
surely be called in three years, right?

Diana

If a broker is holding State General Obligation Bonds and you decide you
don't want to deal with him anymore because he's been unresponsive to
phone calls for about three weeks -- can you

	a. tell him to send you the paper and close the whole account,
	   putting the paper into a safety deposit box and have the
	   interest payments in the future sent directly from the State
	   to you?

	b. or do you have to transfer bonds to another broker in order
	   to obtain interest payments

	c. or are you just stuck with this broker until maturity?

(Actually, I just got him on the phone right now and he was very apologetic;
let's see if he fixes the problem -- but I'm still interested in the answers
to the questions.  He has been warned.)

/john

    John, you should be able to do a or b, and certainly don't have to
    kowtow to c!  You own the bonds, you're the customer, you tell him what
    you want to do (that's legit) and he SHOULD respond or be
    appologetic...  He may nip you for re-registering bonds in your name
    (vs. in the Broker's name) but that should be a minimal/nuissance
    amount...
    
    Keep him on his toes!
    
    Good luck.
    
    				Jack C.